How to Build Affordable Homes with Big Profits

Clair Millard (00:00)
Well, I think the biggest bottleneck is land cost. have so much in certain locations, like in prime areas, they’re asking premiums for ⁓ the land, which adds construction costs. I don’t think people ever really think about that when they’re kind of doing their development. ⁓ And one of the other interesting facts that we’ve been figuring out over the last couple of years.

The cost of the shell of the building, it doesn’t matter if you’re building affordable, you’re building semi-custom or custom, you’re talking concrete, you’re talking exterior walls, you’re talking roofs, you’re talking about windows and doors, that really takes up about 70 % of your cost of a development project.

Dylan Silver (02:18)
Hey folks, welcome back to the show. Today’s guest, Clair Millard is a general contractor in North Florida, primarily in the Jacksonville market. He has over 22 years of experience and has worked on projects across the Southeast. He focuses on developing, designing and building projects, including new construction, commercial build outs, residential renovations and multifamily work. He’s also a licensed auctioneer in Florida and works with developers and homeowners emphasizing doing business the right way with experience.

Contractors, Clair, thanks for taking the time today.

Clair Millard (02:49)
Well, thank you for having me. I’m excited to…

Dylan Silver (02:52)
Now,

we were mentioning in the green room, investors are sometimes coming into difficulty when developing multifamily. I’ve heard this time and time again here over the past couple of months. From your perspective, what are some of the bottlenecks that people face when developing multifamily in today’s market?

Clair Millard (03:12)
Well, I think the biggest bottleneck is land cost. have so much in certain locations, like in prime areas, they’re asking premiums for ⁓ the land, which adds construction costs. I don’t think people ever really think about that when they’re kind of doing their development. ⁓ And one of the other interesting facts that we’ve been figuring out over the last couple of years.

The cost of the shell of the building, it doesn’t matter if you’re building affordable, you’re building semi-custom or custom, you’re talking concrete, you’re talking exterior walls, you’re talking roofs, you’re talking about windows and doors, that really takes up about 70 % of your cost of a development project.

And I think when it comes to trying to build affordable or obtainable housing, there’s really no benefit of that unless there’s like real

big tax incentives or tax breaks or grants from the federal government because what am I going to do? I’m going to go build a house for I could go build a million dollar house and make more profit because if you’re trying to do an attainable house, you’re trying to stay within a price of 300, say 350. But your building cost is north of 200. It might be below 250. And then you got to start figuring out your impact fees, like what the city is going to charge you. You got to figure out your building.

Dylan Silver (04:09)
Yeah.

Clair Millard (04:36)
development costs. have to talk about J, well, Jaxwell Electrical Authority, but your local utilities because they don’t let you connect to their water line or sewer line for free. Plus, then you got to hook up the meters. So I believe there’s a lot of hidden costs that people don’t recognize leading up to building of a project overall. But I think the biggest issue right now is land cost.

Dylan Silver (05:46)
Now we were talking in the green room, your approach is unique and you termed it develop design build. Walk me through that.

Clair Millard (05:55)
Okay, so let’s just say you have a fund like you a couple friends of yours, you’re an investment, a small investment, a financial advisory company where people are in giving you create a fund and you have, I don’t know, a million, two $2 million, $10 million. What we’ve learned is there’s a lot of people that have access to money that don’t understand construction at all because there’s more like you got to. So I have a property, great.

probably a great case study that we could keep referring back and forth to here today that it’s in an area in Jacksonville called Mandarin. It’s ⁓ south of 295, probably about 25 minutes from downtown Jacksonville, ⁓ which is a very highly sought out zip code, really good school district, ⁓ high end houses, restaurants. So I have a friend that has a piece of property. She wants a million dollars for it. It’s two and a half acres.

So knowing what her price is just A, right? The second one is, the second area would be zoning. So we pulled up her zoning of her property and we found out that it’s, ⁓ every zoning is different, but it’s residential low density, which allows anywhere between three and seven houses or units per acre. All right. So that’s one A. One B is that,

Zoning requirements tells you the minimum lot size, but it also tells you What’s your minimum road frontage has to be so the front of the lot? So in an RLD 90, which is what hers is zoned It’s 90 lineal feet across the front from so from left to right has to be 90 feet Maximum or minimum lot coverage is 99 square feet. So that’s 90 by 110 will give you 99 hundred

then they tell you how much area of that lot you can cover, which is 45%. So we’re gonna just kind of round up and let it be 4,500 square feet. So that tells you you could probably, the maximum size house you could build is 2,500 to 3,000, leaves you about 500 square feet for garage and allows you about 1,000 square feet for a driveway. So when they’re talking about lot coverage, they’re talking about everything that’s gonna be covered up.

and rainwater cannot seep through. So you’re talking slab area, you’re talking if you want to put a pool in the back, ⁓ your garage. So you have to kind of account for all of that. So then that tells you what you do. Also in the zoning, they have special ⁓ conditions that you can do, which could be, here’s other things you could put on this lot, but you have to get approval through zoning.

Dylan Silver (08:29)
Yeah.

Clair Millard (08:50)
⁓ One of the options is RLD townhomes. So you can put townhomes on this two and a half acre property. that what that does is it lowers your land costs. So now if you want to say put two houses on that property, it’s a million divide by two. So now each lot has a minimum cost of a half a million dollars to the unit. that’s because you have to allocate all your costs to the number of units that you’re selling. So if you have three, it’s

$333,000 if you got four, it’s a quarter million. So that kind of lowers your land cost by the number of units you could put on there, but it also increases the size of the house or the value of the house you have to build.

Dylan Silver (09:33)
Now, I do see that there’s more folks currently who seem to be getting into ground up construction and development even without a background in any type of.

ground up construction. And I think this is being driven by a number of factors. One of the biggest is you have national builders that are building subdivisions in communities across the country. Cost of materials has gone up. And so, for folks who are doing flips, they’re effectively competing even as a flipper with ground up new construction. For folks who are getting started in development, what…

tips or advice would you have for those people if it’s their first or second project?

Clair Millard (10:49)
Don’t do it. Just kidding. All right. But I would say one thing is hire an experienced general contractor, but you have to like, we were kind of talking about this in the green room. think different regions of the country have different expectations of general contractors. So I’ve been a GC in Florida since 2005. Next year or this year will be 21 years.

In May will be 21 years that I’ve had an active GC license in Florida, but in Florida, as a general contractor, you can function as a third party builder. So that means a developer like yourself goes in buys land, but you have to deal with all of the architects, ⁓ the engineering, the entitlements, the impact fees, and that will delay you getting your ROI back. Cause

instead of hiring me, paying me some upfront money to take care of that due diligence for you, you’re going to have to learn on a curve. a ⁓ few clients of ours have put us under a retainer. So we’re like, okay, hey, pay us five, $10,000, depending on the relationship that they want and what you go. And like, we will start working with you to help you find the land, do the zoning, going back to the Mandarin property.

Dylan Silver (11:53)
You’re having a learner on your own.

Clair Millard (12:17)
So I’m kind of spearheading that and I’m taking it to a handful of investors to look at it. So I did a calculation through Excel from if I build one property or if I build 18 onto that land and it had all of our overall costs associated with that. We know we can’t build 18, we know we’re not building one. So the number is gonna be somewhere between six and 12. So now we’re able to kind of determine.

what our hard costs are for the job and what we’re going to have to build from there to get everything going on. So I would say the biggest thing for new investors are understand the relationship of find a builder you want to build with that you like and that’s personable. That’s going to take the time to show you the right way to do it. And that’s what I want. I just want to make sure everyone’s doing it right. But if we could circle back up.

to the beginning when you’re talking about people are flipping or some of the new investors are going to build versus flip. I believe they’re doing that is the cost to do a flip is so high and what you have to do on the inside for a new construction. can still pay me to build it for you. You hold it for one to five years. You gain the appreciation. You gain the

Depre, depreciation on it as a business and you’re able to gain your money in one to five years, depending on what you want to do. And then also when you build a new home, you’re covered under a warranty. So a lot of times when a flipper goes in, my opinion, I’m going to talk about myself, what I feel like happens. They do the bare minimum to maximize their return because they have to, but they might not be changing out ⁓ shower valves.

Dylan Silver (13:53)
Yeah. Yeah.

Clair Millard (14:06)
but they’re going to go in and say, put in a $2,000 tub surround around a shower valve, but not replace the shower valve. Six months, the shower valve breaks. Now you got to tear out all this wall and replace the shower valve, or you got to do some more work, go into a closet, open up somewhere else, leave the shower. So I believe the investors aren’t digging into the real cost. They come out and say, Hey, I got a $30,000 budget because

They’re looking at is I got to get a $20,000 return. I got to get a $30,000 return on their investment, which it’s their money. You’re allowed to get it. But one of the things about working with me on multiple deals, Ronan say you get the economy of scales. I know, so you were talking about a YouTube video that I did and supposedly got 50,000 views. were talking about drywall and I won’t go into the longs, but I can go to Home Depot and buy drywall for $16 board. All right.

I go to another local drywall distributor here, I pay $22 a board. I know everyone’s like, oh, that’s $5 a board. And then you’re adding up, I need a hundred boards, that’s an extra $500 Clair, but no one’s thinking about getting the material from the edge of the curb into the building. So Home Depot, I’m sorry, the big box stores, orange and blue, they do what’s called curbside delivery. They unload a truck, they put it in the driveway,

have you signed something to walk away? If you use a local to drywall distributor, they come out with this nice truck with the forks onto it. They pick up the drywall, they take it to the door, and then they put it in the rooms that I tell them to. So did you really save $500 or now you got your drywaller coming in and says, hey, I’m gonna charge you $2,000 to move the drywall in and it’s gonna add an extra day or two, cause my guys are gonna be tired. So.

Dylan Silver (15:57)
That’s

a great point. Those logistics can really hang things up and people often wonder where the disconnect is between investors and contractors. And certainly that’s one of them. I do want to pivot here a bit though, Clair, and you’re in the greater Jacksonville market. you’re our eyes and ears on the ground here for today on the show. What are you seeing out there in the Jacksonville market? If folks that are looking to invest out there, what are you seeing? What’s new out there?

What’s the market like?

Clair Millard (17:10)
Well, for Jacksonville, I guess like all major cities, it’s all depending on where you want to be at and what’s your end goal. If you just want to build a house and sell it, ⁓ you have that opportunity. You’ve got the the estates, like the Mandarin property where you can get into. ⁓ If you’re just trying to build and put a long-term hold, you can go down into the downtown areas. Then you buy a lot that’s already pre-existing and you build something that fits into the community.

or you drive out to the beach area and you build a five or $6 million property. So, I mean, it’s really, it’s kind of…

I’ve lived in major cities, Atlanta, Nashville. I did a project out in the Austin area before, Round Rock. ⁓ So they all have similar areas, but it’s what you want to do with your money and what you can get your best return on. ⁓ So what we’re seeing is a lot more people wanting to build duplexes really. They want to be able to put two or three units on a lot. So again, they maximize their land usage saying, again,

Dylan Silver (17:51)
Yeah.

Clair Millard (18:12)
I could put two units on this one house, I’m spending $30,000 on this lot. Now it’s split between two, now it’s really $15,000.

Dylan Silver (18:21)
I’ve heard that, I’ve heard that there’s ⁓ increased interest in folks doing some small, know, duplex, triplex, quadplex, and small multifamily builds. And what’s also interesting as well, and you mentioned this briefly, is infill lots seem to be very popular too. Folks are looking for that opportunity, maybe fire damage, tear down property, to develop or redevelop in certain areas. I wanna touch on that very briefly.

I’ve seen an opportunity now, not just for developers, but also for realtors, for wholesalers, to source land for developers. How important is that connection? Are developers going to realtors and brokers to look for land? Are they going to wholesalers? How are they finding these deals on the land?

Clair Millard (19:10)
all the above, but it goes back to kind what I was talking to on the front end ⁓ about knowing what the zoning requirements are. Because you could, mean, if you wanted to build a 10 acre parcel, you’re more or less on the outskirts of any major Metro city, right? So likely you got wetlands, you got snapping turtles, you got like, these are the costs that

the environmental impact, got what’s the roads looking like, do you have water and sewer down to that area? So you can easily go into an area and buy a 10 acre piece of property, but you might spend a million dollars trying to get water and sewer down to your property because it ended 500 feet down the road. Now you got to pay for that. Then you also got to do, you potentially have to do road improvements. So I think

You brought up the infield lots, you brought up the fire damaged houses or the houses that need to be tore down. The benefits of those are you don’t normally have to pay impact fees because there was a house there before. There’s a water meter there. There’s a sewer connection there. You already have electricity there so you don’t have to run a new power line for your local utility company. So there’s benefits to that because that lowers as a developer.

That lowers developer costs. So you have developer costs, you have construction costs. And the best way that I describe it is anything that you as a developer can pay for is a developer cost. That’s utility connections. That’s your impact fees. Now, if you want me as a GC to carry that fee, I’m okay carrying that fee, but you pay me 10%, 15 % to ask you for the money and me pay those fees. But you know that it’s done and it’s already connected. Like one of the things that you have to do on a new infill lot that doesn’t have

water or sewer, you got to write to your local utility company and ask for them to provide you with a ⁓ capacity use, which they will come in and say, yes, we will add a new water line or we’ll connect to our existing water line. Or they may come back and say, no, we can’t do that. ⁓ Pretty much on infill lots, they don’t.

Dylan Silver (21:24)
Yeah.

Clair Millard (21:29)
say no, it’s when you’re more on the outskirts and the utilities aren’t there, you don’t have water, you don’t have sewer, you don’t have fire hydrants, ⁓ then that’s the area that really those costs start adding up because now you might have to put in a lift station, you might have to run 200 feet of force main connecting to the sanitary lines. So.

I would say if you’re looking for a realtor, you need to interview them and find out are they, reverse age discrimination, you know. The older the realtor, the probably the more knowledgeable they are into the zoning areas and being able to help you do some of your upfront research. ⁓ I think if you go do bigger, the national commercial, if you’re trying to want to build an apartment complex,

I think if you’re gonna go to a national relator, I hate the CBLs, I hate to name drop, because they’re not paying me, but just going with someone there, they know the area, they know the local market, they normally have someone that focuses on land deals and stuff, and then they also know how to do some of that research. Because I think that’s where people are lost at, they don’t know how to do that research, and they’re like, ⁓ I mean,

Dylan Silver (22:41)
Yeah.

Clair Millard (22:44)
I’m able to buy this piece of land. Why can’t I put a house on there? Well, the zoning says you can’t, but, and then the relator saying, oh, you can build it. I’m like, well, there’s steps. Like you have to take that parcel ID, go to the zoning department and say, Hey, I just want to confirm that I can build something on this land. And then let them give you something in writing and say, yes, cause you don’t want to go spend 50 grand on a parcel of land. And then they come back and say, it’s the wrong zoning.

Dylan Silver (22:51)
That’s right.

Clair Millard (23:14)
There was a gas station there before. It’s an old in you. Correct.

Dylan Silver (23:17)
You don’t want to be in that position.

For sure. You know, we are coming up on time here, Clair. Any new projects that you’re working on and then as well, what’s the best way for folks to reach out to your team?

Clair Millard (23:29)
can email me at Clair C L A I R at Ronan R O N or when I am sorry, how to brain fart contractors.net. ⁓ just email me there. I’ll get back to you within 24, 48 hours. ⁓ projects that we got going on, we got a couple of duplexes that we’ve been helping people with the entitlements. there are some of the ones that came in. we have a client that’s in down in, ⁓ clear water area.

We have a couple of clients up here in Jacksonville that were just kind of doing some due diligence. ⁓ I mean, I’ll give you a great example of one of the projects we did here locally. ⁓ It started off with about $150,000 project plus a re-roof. ⁓ It ended at probably spending six to 700,000 that the owner just loved us. And we just started the process. like, hey, look, I want to go in. He wanted a new kitchen. He wanted a new bathroom. ⁓

He gave us design. He’s living there. He gave us his design input puts. Clair, I really like blue. I want this. I want that. I really want this high end refrigerator, the 66 inch one. ⁓ So what we ended up doing for him as we came in, we started the process. He liked the way it was going. He liked our communication skills. And then he just kept adding on and adding on and adding on and adding on. And it’s his house he’s going to live in for the next 10 years. He didn’t.

He didn’t really look at the appreciated value or anything about it. He’s like, okay, these are the comforts I want. and one of the things that we did for him was we built him a, a shower spa room basically. So we built like a six by six shower, put a bench in there, gave it a four function shower head where you have a shower heads coming out of the walls. You got a rain head, you got a handheld, ⁓ had a nightlight function with a Bluetooth. So, you know, after that long day, we put in niches. So after that long day of him.

doing what he does. ⁓ He’s an attorney and he can go sit in there and have his bourbon and just relax at his bathroom to what he wanted. ⁓ I think that’s kind of what helps us is the clients know what they want. They know what they want it to look like and we help them get it to that dream.

Dylan Silver (25:44)
Clair, thank you so much for your time today. Thanks for joining us.

Clair Millard (25:47)
Anytime. I’m only an email away.